Sunday, February 10, 2019

How to Be Profitable in the Stock Market

Image Source: Bigstock Photo

Saving money is great, but eventually you may want to grow your assets more aggressively. The stock market is one of the best places to make significant profit off your existing capital. Some people shy away from it due to fear of uncertainty, but if you can live and function within that ambiguity, you can truly build your wealth.

Before you invest, though, there are some key concepts you will want to learn to increase your chances of success.

Understand Technical and Fundamental Analysis

There are two main ways to vet a potential company for investment: technical and fundamental analysis. Technical analysis means learning how to read stock market charts to identify trends and give you a better idea of when you should enter or exit your positions.

Fundamental analysis focuses on ways to address the underlying value of a particular company’s stock. This approach takes into account things like a company’s financial standing, the wider economic environment in that industry, and the strength of the management team. Using these factors, traders and investors compare the current price of a stock to their valuation of it to determine if the stock is over or undervalued.

These two methods combined allow traders and investors to analyze a particular stock and try to time optimal entry and exit times for maximum profit.

Timing the Market

Picking the best time to buy or sell is one of the most challenging parts of trading and investing. You can choose a great company with spectacular fundamentals, but if you buy when their stocks are at all-time high prices, you are still likely to lose money when the stock consolidates, or evens out. 

Some ways to gauge the market for entry and exit points are by using technical analysis, being vigilant before and after annual earning reports come out, staying a step ahead of major news announcements that can impact price, and by properly evaluating assets for over and undervaluation.

No one can win all the time, so don’t get too discouraged if you don’t perfectly time the market.

Learn, Learn, Learn

There is no such thing as a perfect trader, but don’t be one who simply wings it either. Constantly improve your skills and deepen your information about your target markets. There are troves of great information on the web, so stay curious and be proactive about maximizing your knowledge base.

A proprietary trading firm like Maverick Trading even hires and trains inexperienced traders. If you are very serious about trading, learning from industry experts can really speed up the learning process.

Don’t Compound Your Mistakes

Sometimes when you are playing the market, you are going to make the wrong choice. Maybe you set your stop limit too high, the stock price dipped, and then your order sold right before the stock went on a big run. Now you’re upset because the stock gained 30%, and you want back in. Then you buy it back, and the price swings back down. Now not only did you miss out on the bump, you also lost money on the dip. These mistakes can be infuriating.

Emotions are one of your biggest enemies in trading. You don’t want to make moves based on your emotional state, which can be hard when you have major money on the line. Instead of trading on emotions, develop personal trading principles that you stick to regardless of the situation. By creating these principles, you can follow best practices rather than the wind of emotion.

The major theme here is that information is power. If you want to trade, don’t just shoot in the dark and hope for the best. Trades aren’t won on hope, they are won with knowledge.

About the author: Anthony M. Christensen is a writer, digital marketer, and owner of Astronautical LLC. He earned a BS in English at Utah Valley University. He loves art and wandering the mountains and deserts of his native state, Utah. Connect with him on LinkedIn.

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